AAR Rejects Rectification Plea on Bus Body Building GST Classification as no apparent error

In re Tvl. Kailash Vahn Private Limited (GST AAR Tamil Nadu)

The Tamil Nadu Appellate Authority for Advance Ruling (AAAR) has dismissed an application filed by M/s. Kailash Vahn Private Limited seeking rectification of an earlier advance ruling concerning the GST classification and rate for bus body-building activities. The authority, in its order dated October 17, 2024, found no error apparent on the face of the record, stating that the points raised in the rectification plea had already been addressed in the initial ruling.

M/s. Kailash Vahn Private Limited had approached the AAAR under Section 102 of the Central Goods and Services Tax (CGST) Act, 2017, seeking to amend Advance Ruling No. 19/ARA/2024, issued on September 23, 2024. The company contended that minor corrections were needed in the ruling to fully align with the factual and legal interpretations presented in the detailed discussion within the original order.

Background of the Original Ruling

Kailash Vahn had originally sought clarification on three key aspects of their bus body-building operations:

1. Classification of Activity: Whether the body-building activity could be considered “job work” and a “supply of services” under SAC Code 998881 (“Motor vehicle and trailer manufacturing services”).

• • Original Ruling: The Authority had ruled that body-building on chassis, whether owned by registered or unregistered customers, falls under “supply of service” (Heading 9988, Service Code 998881). However, only body-building on chassis owned by GST-registered customers qualified as “job work.”

2. Applicable GST Rate for Job Work: If considered job work/supply of services, whether the GST rate would be 18% under Sl. No. 26(ic) or Sl. No. 26(iv) of Notification No. 11/2017-CT(Rate).

• • Original Ruling: The Authority clarified that for both scenarios (chassis from GST-registered or unregistered persons), the tax rate would be 9% CGST and 9% SGST, as per Entry No. 26(ic) and Entry No. 26(iv) respectively of the relevant notifications.

3. Classification as Supply of Goods: Alternatively, whether the activity of body-building on a principal-supplied chassis would be considered a “supply of goods” under HSN 8707 (“Bodies (including cabs), for the motor vehicles of headings 8701 to 8705”), attracting 28% GST.

• • Original Ruling: This query was not answered, with the Authority citing reasons discussed elsewhere in their detailed order.

Rectification Request and Authority’s Stance

The core of Kailash Vahn’s rectification application centered on the first query. They sought to add specific wording to the formal ruling portion to explicitly state that “the supply of services activity of body building on chassis owned by unregistered customer is covered by Sl. No. 26(iv) as per classification under heading 998881 read with ‘Schedule II of the CGST Act, 2017′”. The company’s advocate reiterated during a personal hearing that while the original ruling’s detailed discussion (Para 7.14) clarified the position for both registered and unregistered customers, this clarity needed to be explicitly reflected in the “ruling” section itself.

The AAAR, after reviewing the application and hearing the authorized representative, cited Section 102 of the CGST Act, which permits rectification only for “errors apparent on the face of record.” The Authority emphasized that the original ruling extensively discussed the scenarios of both registered and unregistered customers in its detailed findings, particularly in Para 7.14. This paragraph clearly differentiated between job work (for registered customers) and other manufacturing services (for unregistered customers) and applied the respective GST rates under Sl. No. 26(ic) and Sl. No. 26(iv).

Judicial Precedents and Reasoning

While the order itself does not explicitly refer to specific judicial precedents from higher courts, its reliance on Section 102 of the CGST Act, 2017, concerning “Rectification of Advance Ruling,” aligns with the general legal principle that review or rectification mechanisms are typically limited to correcting obvious mistakes or omissions, not re-adjudicating issues or adding new clarifications that were already implicitly or explicitly covered in the original decision’s reasoning.

The Authority’s decision underscores the principle that an “error apparent on the face of the record” must be a patent, obvious, and self-evident mistake, requiring no elaborate argument or detailed inquiry to establish. The AAAR concluded that the applicant’s request to incorporate additional wording in the ruling portion was “redundant and not required” because the original order’s discussion sufficiently addressed all queries. They noted that it is impractical for authorities to include every detailed discussion point directly in the concise ruling portion.

Therefore, the AAAR found no legitimate basis for rectification under Section 102, concluding that the original Advance Ruling had adequately answered the applicant’s queries. The application for rectification was consequently rejected.

There is no error/mistake apparent on the face of record, as the applicant’s requested portion in their rectification of mistake application has already been recorded in the Advance Ruling and given as ruling for the queries raised by the applicant

FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, TAMILNADU

PROC EEDINGS UNDER SECTION 102 O F TH E CGST ACT, 2017 AND UNDER SECTION 102 OF THE TNGST A CT. 2017

M/s. Kailash Vahn Private Limited having GSTIN 33AAACK7302G1Z0 has filed an application dated 17.10.2024 for rectification of mistake (ROM) under section 102 of the CGST Act, 2017 against the ruling by the Authority vide Advance Ruling No.19/ARA/2024, dated 23.09.2024.

2. The applicant has filed the instant rectification application before this Authority for rectification of errors which were apparent on the face of the order. The applicant has reproduced clarification sought in their original application and the ruling issued by the authorities as follows,

3. ERRORS APPARENT ON THE FACE OF RECORD:

3.1 The applicant has submitted that para 7.14 of ruling is reproduced here for ready reference,

Para 7.14 of order refers as under:

7.14. Now we take up the second question of the applicant i.e if it is regarded as “job work activity” and “supply of services” whether the correct applicable rate of GST, will be at 18% (9+9) as applicable under Sl.No.26(ic) or will it be 18% (9+9) as applicable under Sl.No.26(iv). We reiterate that the bus body building on chassis owned by GST registered customer amounts to Job work and the bus body building on chassis owned by un-registered customer does not amount to job work. The rate of tax in both the cases i.e. if chassis is provided by the GST registered person or when chassis is provided by GST un-registered person, would be 9% under the CGST Act, 2017 and 9% under the SGST Act, 2017 as per Entry No.26 (ic) and per Entry No. 26(iv) respectively of the CGST Notification No.11/2017 CT( R) dated 28.06.2017 and SGST Notification No. II(2)/CTR/532(d-14) 2017 vide G.O(Ms)No.72 dated 29.06.2017.

3.2 The applicant has approached the bench by way of rectification to kindly look into the following minor correction suggested in Serial No.(1) of the Ruling, so as to fully align with factual and legal interpretation affirmed at Para 7.14 of the Order.

3.3 The minor correction relating to Ruling No.1 suggested by the applicant which they feel is apparent on record, is mentioned below in bold is as follows,

1) The activity of body building on chassis owned by registered customer or un-registered customer both fall under the scope of supply of service and as per the scheme of classification of services merits classification under Heading 9988 ‘Manufacturing services on physical inputs (goods) owned by others’ and precisely at Service code (Tariff) 998881 ‘Motor vehicle and trailer manufacturing services’. However, only the supply of the activity of body building on chassis owned by GST registered customer is Job work covered by SL No. 26(ic). The supply of services activity of body building on chassis owned by unregistered customer is covered by St No. 26(iv) as per classification under heading 998881 read with “Schedule 11 of the CGST Act, 2017″.

4. Personal Hearing:

Shri S. Narayanan, Advocate & Authorised Representative (AR) appeared for the personal hearing as scheduled for M/s. Kailash Vahn Private Limited. AR reiterated the submissions made in their rectification application. AR stated that para 7.14 of the ruling categorically discussed the classification of goods received from registered and un-registered supplier.

Though the order of AAR clarified the quires raised by the applicant, AR further needed certain amendment in the order portion to explicitly include the status of both registered and un-registered supplier.

5. Discussions and Findings:

5.1 We have carefully considered the submissions made by the applicant in the application for rectification of mistake (ROM) and the submissions made by the applicant during the personal hearing.

5.2 In this regard, it is seen that the applicant has filed the application dated 17.10.2024 for rectification of mistake under Section 102 of the CGST Act 2017. Section 102 specifically relates to “Rectification of Advance Ruling”, which reads as below,

“The Authority or the Appellate Authority (or the National Appellate Authority) may amend any order passed by it under Section 98 or Section 101 (or Section 101C, respectively) so as to rectify any error apparent on the face of record, if such error is noticed by the Authority or the Appellate Authority (or the National Appellate Authority) on its own accord, or is brought to its notice by the concerned officer, the jurisdictional officer, the applicant (appellant, the Authority or the Appellate Authority) within a period of six months from the date of the order.

Provided that no rectification which has the effect of enhancing the tax liability or reducing the amount of admissible input tax credit shall be made unless the applicant or the appellant has been given an opportunity of being heard”.

5.3 In the instant case on hand, the AR of the applicant has requested rectification of the ruling which was stated in Para 7.14 of the ruling which had categorically discussed as, “the bus body building on chassis owned by GST registered customer amounts to Job work and the bus body building on chassis owned by un-registered customer does not amount to job work. The rate of tax in both the cases i.e. if chassis is provided by the GST registered person or when chassis is provided by GST un-registered person, would be 9% under the CGST Act, 2017 and 9% under the SGST Act, 2017 as per Entry No.26 (lc) and per Entry No.26 (iv) respectively.

5.4 . We draw attention to query-1 raised by the applicant for which they have sought advance ruling. The query seeks clarification as to “whether the Applicant can consider the body building activity as “job work activity’ and regard it as “Supply of Services” falling under SAC Code – 998881 – “Motor vehicle and trailer manufacturing services “(as per Notification No. 11/2017-CT(Rate), dated 28.6.2017 Si. No.535)”. As per the definition of ‘job work’, an activity shall be construed as ‘job work’ only when ‘treatment or process is undertaken’. ‘the goods on which such process or treatment undertaken should belong to another person’ and finally ‘that person should be a registered person’.

5.5 While presenting the facts in the original application before the authority, the application is silent about the registered or unregistered customers, but the applicant had stated that the chassis supplied are from both Original Equipment Manufacturers (OEMs) customers and independent customers. Any activity can be classified as ‘job work’ only when the goods supplied for job work on which any treatment or process is undertaken belonged to a registered person. The activity of bus body building was specifically inserted in SI. No. 26 as “(lc) in the original notification No. 11/2017-CT(Rate) dated 28-06-2017 by amending Notification No. 20/2019-CT(Rate) dated 30-09-2019 with effect from 01-10-2019 with an explanation that the said job work activity is chargeable to tax @ 18%^.“. For all other types of manufacturing services on physical inputs (goods) owned by others, such activity would fall under clause (iv) of SI. No. 26 of the notification ibid, chargeable to tax @ 18%. Therefore, para 7.14 analyses the scenario of both registered and unregistered supplier of goods (chassis) for body building. However, the ruling shall be given only for the queries raised in the application and it is impossible for the authorities to bring all the discussions in the ruling portion.

5.6 Accordingly, the amendment suggested by the applicant in their rectification application for inclusion in the order portion, the status of both the registered and un-registered supplier in Ruling No.1 shall not be acceded to as it is felt that it is not needed.

5.7 In view of the above, it is informed that as per Section 102 of the Act, rectification of advance ruling is required only if there is any error apparent on the face of record. In the instant case, we are of the view that the applicant’s request to add the following portion “the supply of services activity of body building on chassis owned by unregistered customer is covered by SI. No. 26(iv) as per classification under heading 998881 read with “Schedule II of the CGST Act, 2017″ at the end of the ruling no.1” appears redundant and not required.

5.8 It could be seen from the ruling that the applicant’s query No. 1 was clearly discussed and only after analysis and reference to the clarificatory circular issued by the CBIC the Advance Ruling Authority had ruled that “body building activity fall under the scope of supply of service and the activity of body building on chassis owned by registered customer is Job work” which is amply clear. There is no other clarification required by the applicant in the query about the portion as to whether the job work activity and supply of service come under SI.No.26 (ic) or (iv) of Notification No.11/2017 – CT(R ), dated 28.06.2017. Further, the discussion and findings of the then Advance Ruling Authorities from paras 7.11 to 7.14 are sufficient to answer all the queries raised by the applicant in their original application.

5.9 In view of the above, we decide that there is no error/mistake apparent on the face of record, as the applicant’s requested portion in their rectification of mistake application has already been recorded in the Advance Ruling and given as ruling for the queries raised by the applicant. Thus, the instant application for rectification of advance ruling is liable for rejection in terms of Section 98(2) of the CGST/TNGST Act, 2017.